The last year has seen connected TV proving its long-term value. Skyrocketing growth of streaming audiences has spurred an insatiable desire for advertising on these platforms. Having spent most of the year on the front lines meeting with hundreds of local agencies and ad buyers, here’s my assessment on the lessons learned in the connected TV (CTV) advertising market for 2018.

The fourth quarter saw the largest spike in the cord-cutting trend as more than 1 million consumers canceled their cable TV or satellite subscriptions. CTV has emerged as the fastest-growing video segment this year, with marketers planning to dramatically increase their CTV budget commitments, according to an Advertiser Perceptions study. At the same time, the fragmentation of the streaming TV ecosystem is only getting worse as direct-to-consumer (DTC) streaming services are popping up on a weekly basis.

For many agencies and brand marketers, the perception of CTV is that it’s still an emerging market made up of a highly complex network of players, which makes the buying experience confusing. There’s still a lack of understanding of the differentiation in inventory quality and execution among providers as each platform has its own set of targeting parameters and measurement approaches. More importantly, when it comes to budget, marketers are still figuring out whether CTV should be part of the TV or digital budget or whether it stands on its own.

We had a lively exchange of ideas centered around the complexities facing content producers, ways to balance established and new video distribution avenues, and strategies for companies to drive growth in the changing video landscape.

With the advent of new distribution channels and direct-to-consumer options upturning established windowing strategies and partnerships, content producers must evolve and remove their legacy mindset to capitalize on the new opportunities for distributing and monetizing content.

Here are key takeaways from our panel:

Should programmers create niche versus general market content?
Our panelists agreed that OTT services need to fall into either niche or general market content categories. But without the deep-pocketed resources of the streaming giants (Amazon, Netflix and soon to launch Disney and AT&T’s WarnerMedia), content companies will have a difficult time competing in the general market space. Instead, there are tremendous growth opportunities for niche players in the booming ad-supported OTT market. Pure-play and niche OTT networks, such as MLB.TV, Newsy and Tubi TV, are gaining significant traction with attracting growing audiences. Cutting through the competition is one of the big challenges for niche OTT services, so picking the right genre, focusing on the right audiences and have a clear brand proposition will be the key to success.

Where do programmers invest their resources?
The fundamental question content producers should be asking is: In what screen and in what transmission do we invest in? The easy answer is all screens, all the time, but that is an expensive gamble. With the increasing fragmentation of the OTT landscape, content owners are spending exorbitant amounts on app development. Only certain platforms have been able to recuperate that investment. Furthermore, ATSC 3.0 and 5G threaten today’s dominance of traditional cable, satellite, and internet delivery of high-quality video. The winner will likely be determined by proximity to the user (i.e. the device manufacturer like Apple) or the success of bundled services (e.g. AT&T pairing content with a 5G plan).

Consolidation: Do you join forces and with whom?
The rise of mega-mergers is driving more competition with OTT streamers. According to Ampere Analysis, four of every $10 in the United States will be accounted for by Comcast/Sky and Disney/Fox. The growing consolidation will mean less competition for rights for small players and this inevitably impacts their ability to negotiate favorable deals. The cost of marketing services will continue to frustrate small to medium upstarts. As such, aggregators will serve an essential place in OTT’s future for both SVODs and AVODs.

In the end, personalization of both content and experience will be tantamount to success on all platforms. Consumers are the ultimate winners as competitive pressures will drive media companies to forego near-term profits to please users with fresh content on all screens at affordable costs. Someday in the future, consumers will need to shoulder the cost of their increased demands—limited to no-commercials and content delivery on every screen. But, let’s all enjoy the spoils of today’s content wars for now.

US connected TV users reached 182.6 million in 2018, comprising 55% of the US population*. This area will continue to grow as we work to create an urgency about how to follow consumers from traditional TV to OTT.

*Source eMarketer/IAB Video Landscape Report

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